Indian Express Industry 2018 - A multi-modal play in building the ecosystem
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Indian Express Industry – 2018 A multi-modal play in building the ecosystem
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Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Contents
Executive Summary 4
India’s position in the global express industry 6
Evolution of the express industry 7
Global market landscape 7
Key growth drivers 13
Future of the express industry 13
India’s position in the global express market 18
Indian express industry – An overview 20
Evolution of the express industry in India 21
Value chain of the Indian express industry 21
Contribution to the economy 22
Indian express industry landscape 24
Industry structure 25
Supply landscape for express industry in India 26
Demand landscape for express industry in India 26
E-retail and Indian express industry 34
E-retail landscape in India 35
Evolution of express for e-retail 36
Express landscape for e-retail 37
Impact of e-retail on express 39
Regulatory environment for express industry in India 44
GST implementation 45
Electronic way bill (e-way bill) 47
Air infrastructure 49
Customs 50
Import-export policy 51
Other industry (e-commerce) specific regulatory policies 52
Future potential of the Indian express industry 54
Growth drivers for Indian express industry 55
The way ahead for Indian express industry 60
Annexure – Approach and methodology 62
Glossary 66
03
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Executive Summary
Indian express industry is one of the Outbound express is estimated to education, telecom or government and
fastest growing markets globally, have grown at 15% CAGR over the public services sector. At a domestic level
however it has a small share of less than past 5 years and contributes close to the size of this segment is expected to be
2% of the global market. The Indian 60% (in terms of volume) to the total around INR 7,000 cr.
express industry grew at 15% CAGR over international express while inbound
the past 5 years and is estimated to be express contributes the remaining 40%. Express landscape for e-retail
INR 22,000 cr in FY17. The outbound express mainly consists E-retail, as a part of the B2C express
of samples, documents and goods such segment, is estimated to contribute
Domestic express industry, comprising as apparel, leather articles, handicrafts, INR 5,000 cr to the express industry in
of shipments transported and delivered gems, etc. The inbound express on the FY17. In terms of volume, close to 1.3 mn
within the country, is a key constituent other hand consists of samples from shipments are shipped daily – including
of the Indian express industry and is various industries and non-samples such the forward fulfilments and returns.
estimated to be worth INR 17,000 cr. The as components of industrial goods, auto
surface express constitutes INR 12,000 component spare parts, equipment, The disaggregated nature of demand and
cr of the total domestic express while air lifesaving drugs, and aircraft parts etc. supply, high variability and the complexity
express constitutes the remaining INR which are time-sensitive. of returns for e-retail has challenged
5,000 cr. the traditional express operations.
Customer-wise segmentation of the However, this has also unlocked many
The share of surface express in express services opportunities for the express players
domestic express has improved by 16 The express industry is further classified by providing newer avenues for value
percentage points in the last five years, into two segments - B2B (business addition. The highly competitive nature
mainly due to active substitution of air to business) and B2C (business to of e-retail players has translated to an
express by surface express. With GST consumer). Companies involved in increased competitiveness in the express
implementation, higher efficiencies are manufacturing and engineering are the landscape with the players adopting
expected in the surface transport and the key users of B2B express services. Some innovative models based on technology
share of surface is expected to improve in of these industries include electronics and collaboration to address the
the future. (OEMs), digital goods, auto-components, prevalent challenges and opportunities to
textiles, pharma, medical devices, and create differentiated value propositions.
International express has grown at 12% industrial engineering. The B2B segment The dynamic and competitive nature
CAGR over the past five years and is at a domestic India market level is of the e-retail segment has brought in
estimated to contribute close to INR 5,000 estimated to be around INR 10,000 cr. many new trends for the industry such as
cr (23% by value) to the Indian express adoption of alternate delivery methods,
industry. Growth of medium and small On the other hand, in the B2C segment customer centric delivery, shift from
scale industries, growth of manufacturing e-commerce is the largest contributor air express to surface express, increase
facilities and deployment of technologies with more than 70 per cent contribution, in regional movement, adoption of
facilitating API integration and superior followed by Banking and Financial technology and expansion to remote
tracking and tracing have been the key Services Industry (BFSI) and other locations.
drivers of international express. document deliveries belonging to
04
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Express industry – a key facilitator of The way ahead in the economy. Improvements in the
the Indian economy The need for time bound delivery air infrastructure, customs, export-
The express industry is labour intensive services is expected to increase with import policy and e-way bill could also
and creates employment for a large economic growth and development of substantially benefit the industry.
number of people directly and indirectly. trade and commerce in the country. The express industry would continue
The industry also uses services such as The Indian express industry is expected to hold a larger play in employment
transportation, rail, warehousing, airport to grow at a CAGR of 17% and reach a creation. The industry is expected to
services, and cargo handlers leading size of INR 48,000 cr in the next 5 years. increase its employee base to close to
to significant indirect employment. It This growth will be primarily driven by 2.6 mn to manage the increased scale
is estimated that the industry employs the growth of e-commerce, significant and size of operations. The level of
around 1.6 mn people both directly and demand from the small and medium B2B outsourcing is expected to increase
indirectly. segment and growth of country’s cross- leading to indirect employment creation
border trade. in varied sectors such as transport
The express industry also contributes to services, rail, warehousing and airport
the national exchequer by way of direct The regulatory policies and the services etc.
and indirect taxes. In FY17, the express infrastructure readiness are the
industry contributed around INR 3,000 key factors impacting the logistics In addition, keeping in pace and to
cr by way of Service Tax and another INR performance of Indian express sustain the growth momentum, the
2,000 cr through Custom Duties besides industry. Regulatory changes such as industry is poised to make significant
contribution in the form of direct taxes GST implementation are expected to investments in infrastructure, technology,
around employment creation.1 The social give a fillip to the industry by reducing data analytics, security and automation.
security benefits offered to employees complexities related to movement of These investments are expected to
in compliance to the laws of the land are goods and boosting the overall demand benefit the economy multi-fold.
immense, thereby improving quality of
lives.
In addition, express industry plays the
role of a business enabler by providing
logistics links to its customers. It helps
businesses reach out to their customers
and partners by providing time bound
shipment services. Express delivery
services are becoming increasingly
important for the competitiveness of
companies - maximise the efficiency of
their production activities, minimise their
inventory costs, provide a superlative
customer experience, etc. Small, medium
and micro enterprises are engaging with
express providers for high quality, rapid
delivery services that they cannot not
provide themselves. Express industry
is also vital for companies looking to
connect their products/services to the
entire country on domestic side and to
the world on export/import markets.
1
Department of Revenue, Central Board of Excise and Customs, Deloitte Analysis
05
Indian Express Industry – 2018| A multi-modal play in building the ecosystem India’s position in the global express industry 06
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Evolution of the express Industry These advancements eventually resulted in the emergence of
The express industry is estimated to have originated during express delivery in the 1960s. Around this time, the industry
the 1850s in the United States (US) when the US congress gained prominence around its ability to provide value added, time
sanctioned overland stage route that carried mail and parcels. bound, reliable, on demand, integrated door-to-door logistics for
This resulted in the growth of surface transport and led to the documents, parcels and merchandise goods which neither the
first transcontinental mail and passenger service and aided postal services nor the freight forwarders could provide.
the rise of the pony or stage coach system. Private express
companies such as Wells Fargo capitalized on these changes to Subsequently in the late 1970s, de-regulation of air cargo in the
create formidable enterprises for mail and package delivery. The US led to rapid growth. The industry moved out of the US and
growth of industry was further propelled in the 1900’s with the turned into a global business in the 1980s. Globalization and an
emergence of companies such as UPS using motor vehicles and increase in cross-border trade played a significant role in the
air transportation. UPS started its operations in 1907 and utilized global expansion of the industry. The industry was also given
motor vehicles to deliver packages from grocery and drug stores to impetus by the further development of the global aviation sector,
customers’ homes. Success driven expansion led to the company since express service providers would often ship large bags of
pioneering the world’s first air express service in 1929. Subsequent documents on commercial flights.
technological advancements and changes in US shopping patterns
propelled express carriers to upscale and offer services such as
two-day air delivery to major East and West Coast cities.
Evolution of the global express industry
Express industry Makes an entry into Rapid growth in India post
originates in the US the European Market liberalization policies
1960s 1970s 1980s 1990s
Strong domestic International Enters developing
growth Expansion regions including India
Express delivery services evolved from solely delivering parcels the country as well. The industry also got a big boost in the 1990s,
and documents, which were high-value low-weight items, to post the policy liberalization which saw some radical changes in
now also providing delivery services for specialised items such the transportation regulations, freeing up the overall economy.
as high-tech products and general airfreight commodities.
Express vendors are increasingly providing more value-added Global market landscape
services to customers to enhance the delivery process. The Market size & segmentation
regular users of express delivery services in the global context Express, which is an important part of the global Courier,
are mainly knowledge-based and high-tech industries like Express, Parcel (CEP) industry, has operators which provide
financial services, automotive, IT, telecom, pharmaceuticals etc. guaranteed, fast, reliable, on-demand, worldwide, integrated
However, the recent times have witnessed the emergence of door-to-door shipments. The deliveries are usually completed
e-commerce as large customers of express industry. within one to two days with the usage of both airways as well as
road transport, to ensure timely delivery.
While the express industry was established in the late 1960s,
organized express delivery services began in India only during The global express market is estimated to be around USD 198
the 1980s. International express service companies entered the bn in 2016.2 The market posted a higher growth of 4% CAGR in
market around this time through tie-up with Indian players. As the period 2014-16 as compared to 2005-14 owing to the rapid
the scale of operations and expertise grew, these companies also increase in e-commerce transactions.
expanded their coverage to large non-document shipments in
2
Technavio Global Courier Express and Parcel Market 2016-2020, Accenture: Adding Value to Parcel Delivery, 2015
07
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Global express market (USD bn) The express segment is expected to continue its growth
trajectory and gain increasing share of the total CEP market. In
198 2016, express delivery was estimated to have a 73% share of the
+4%
total market which is expected to increase to 75% by 2020.3
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Large companies in the express industry commonly use a hub above figure). Through these facilities, collected packages are
& spoke network (shown in figure above) for package collection. either routed to customers through hubs or distributed to them
Shipments are collected from the source locations and brought directly. Utilizing such a network allows improved tracking, which
to central processing facilities (depicted by the ‘Local stations’ in in turn allows greater transparency and security.
Evolution of first mile express logistics
•• Technology •• Automation leading •• Express customs •• Companies have
integration with to efficiencies clearance larger dedicated air
logistics player fleets which reflect
•• Analytics and use •• Internet induced
real time data for
•• Track and trace of cloud leading to simplification of
consumers
technology optimal placement processes
increasing visibility of station
•• Automated checking
•• Increased security •• Barcode scanning and sorting creating
efficiencies
Local Station Country
Evolution Customer Hub
(Origin) Gateway
Evolution of last mile express logistics
•• Easy to use •• Automation leading •• Express inbound •• Companies have
and convenient to sorting and customs clearance larger dedicated air
applications for dispatch efficiencies fleets which reflect
•• Internet induced
tracking real time data for
•• Analytics and use simplification of
consumers
•• Increasing number of cloud leading to processes
of cost effective optimal placement
•• Automated checking
express solutions of station
and sorting creating
efficiencies
Local Station Country
Customer Hub Evolution
(Origin) Gateway
Source: Deloitte Analysis
It can be noted in the figure above that the value chain is the demand for express delivery services have seen significant
witnessing a significant disruption due to evolving technologies growth. The industry, however, is fragmented and localized in
as well as newer business models. With increasing internet most parts of the world with many local vendors catering to each
penetration, the consumers are more digitally enabled now, logistics segment. The competition has also been increasing
which has resulted in a shift in their bargaining power. Rise of the through new entrants given the expected growth prospects of
digital consumers has led to more competition in the industry e-commerce. Companies are continually seeking a competitive
and has necessitated steps by industry players to provide greater edge by constantly adapting to the changing landscape.
transparency across the value chain. Industry players have
continually needed to develop new resources and capabilities The global market is dominated by three (previously four before
across each step of the value chain to meet the consumer FedEx’s acquisition of TNT) large players, also referred to as
demand. ‘integrators’. However, as noted above, the industry still remains
highly competitive. Summary of the three leading industry players
Supply landscape and trends (‘Integrators’) is given in the table below:
With the increase in trade, particularly cross-border transactions,
09
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Summary of the leading express players globally
Company Revenue (USD Bn.) Express share of Company express segment insight4
(Reporting Year)1 revenue (%)
Deutsche Post 65.8 24%2 International markets- with increasing cross border
AG (DHL) (CY 2016) ecommerce and a growing importance of SMB’s-
account for over 90% express revenue
United Parcel Service 60.9 NA Increasing number of light weight packages leading to a
(UPS) (CY 2016) reduction the per piece revenue
FedEx Corporation 60.3 58%3 Express is the only segment with increasing operating
(FY 2017) margins for the company
Source: 1. Latest annual reports, 2. Revenues from express division considered, 3. Revenues from FedEx Express and TNT Express considered, 4. Deloitte
Analysis
While all three of these players have global presence in over Poste (France), India Post with Speed Post (India). These postal
200 countries, their market share varies greatly by region. The services also often have international presence, but it is limited
integrators are making investments to expand their capacity compared to that of the integrators. Individual countries also
organically and modernize their network and are also expanding have smaller players that operate within a specific geography or
inorganically to widen their capabilities. niche segment. Furthermore, in most countries, there are a large
number of even smaller, low-cost low-price players that cater to
FedEx has focused on expanding its business operations in new mostly document and small parcel delivery services within a given
and emerging markets. To achieve its strategic initiatives, in May city or region.
2016, it acquired TNT Express, the world’s fourth largest operator
for USD 4.8 Billion4. The acquisition is seen to have enabled FedEx Demand landscape and trends
to expand the portfolio of services it offered in the ecommerce The main users of express industry include companies from small
sector in Europe and tap into TNT’s strong network in the Middle- and medium enterprises, with occasional or regular shipping
East, Africa and the Asia Pacific regions. needs or larger volume businesses. Key industry segments that
use express services include engineering and manufacturing,
Deutsche Post (DHL) on the other hand, focused on expanding its transportation, retail, health services, and financial services.
service offerings and entering new markets through investments
in order to maintain its growth trajectory. To this effect, in 2015, Customer habits have been evolving rapidly in the last decade
the company invested USD 108 million5 in its American hub with the increasing penetration of internet and popularity of
facility to upscale its e-commerce and global trade capabilities, e-commerce. Going forward, the influence of e-commerce, both
expanded its cold chain network services for the life sciences in the B2B and B2C segments, is expected to continue growing
and healthcare sector in Europe and won a major contract with as the overall e-commerce industry, in major growth regions like
BMW to manage its UK aftermarket parts distribution. In 2016, Asia-Pacific, is expected to continue showing double-digit growth
the company further enhanced its e-commerce capabilities by and increasing cross-border trade.
acquiring a minority stake in Relais Colis, a French ecommerce
logistics specialist. E-commerce
In the B2B segment, many firms are now driven towards
Apart from these large logistics providers, each country has greater adoption of e-commerce by a pressure to compete at a
their postal service providers that also provides express and global level and as a result, e-commerce is a growing trend for
other value-added services e.g. USPS (US), Royal Mail (UK), La businesses as they expand and reach new customers. In the B2C
4
FedEx website news article | FedEx and TNT Express Agree on Recommended All-Cash Public Offer for All TNT Express Shares
5
BusinessWire news article | DHL Is Investing $108 Million in Its Americas Hub at the Cincinnati/Northern Kentucky Airport
10Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Express industry in China segment, North America and Europe have traditionally been the
largest markets but growth is fastest is the Asia-Pacific region.
91.9
There is also an increased influence of cross-border e-commerce
in the B2C segment. For example, in China alone, the e-commerce
market growth has contributed to express industry size growing
multifold, primarily express logistics driving the demand.
18,410
As B2C e-commerce demand continues to grow, the role of
last mile logistics has taken the spotlight with a number of
15.1 investments and start-ups seen in the space around the world.
Increasing demand for speed of delivery and expanding internet
1,282
penetration leading to a greater number of regions active
2008 2013 online has led to significant disruption in the last mile market in
Internet shopping market in China (RMB 100 million) recent years. Technologies, especially automation around parcel
Express delivery volume (100 mn pieces) sortation, smart delivery vehicles and aviation infrastructure,
addition of aircrafts (including dedicated cargo versions) besides
other means of rail and sea/river links are expected to play a key
Between 2008 and 2013, China’s internet shopping market registered a CAGR
of 70% to reach RMB 1.8 trillion by 2013 Driven by the demand for quality role in the evolution of this industry.
service and speed and safety in delivery, the express industry saw its volume
grow 6x in the same time period. Key Express regions and countries
Source: Deloitte and Development & Research Center of The State Post North America continues to be the largest market for express
Bureau Report: China’s Express Sector Development Report, 2014 delivery services, led by the US. The US market is divided into
Key countries in the global express market (Express market size in USD bn, year)
Germany
5 (2014)
UK*
15 (2016)
USA
78 (2016) China
60 (2016)
India
3.4 (2017)
*UK number estimated based on 2014 market size and forecasted growth between 2014-2019
Source: USA: Firstresearch news article: Express Delivery Services Industry Profile, 2017, UK: Mintel Report | Courier and express delivery market posts strong
growth as young men splash out on next day services, 2015 and Deloitte Analysis, Germany: Bundesverband Paket & Express Logistik (BIEK) Report: KEP-Studie
2015 – Analyse des Marktes in Deutschland, China: BusinessWire news article: China Express Delivery Industry Research Report 2017-2021 - Research and
Markets, India: Deloitte Analysis
11Indian Express Industry – 2018| A multi-modal play in building the ecosystem
two main segments: the large networked couriers capable of Capabilities such as electronic customs has made it easier for
nationwide and international deliveries and the smaller local logistics players to have their documentation accepted and
services that transport packages within a metropolitan area. processed. This has also resulted in 24/7 automated processing
FedEx and UPS dominate the national market, while the smaller of documentation. Inspections at the operator facilities have
services segment is far more fragmented. improved TAT for most companies and negated the use of third
party broker induced inspection delays.
In Europe, U.K and Germany are the leading express delivery
markets. In line with the other key markets, ecommerce has
played an important role in helping Europe showcase strong
growth in its express delivery services.
24
China, the second largest express market globally, has also grown ic /7
on s A
significantly due to the booming e-commerce industry. Express tr Cu ut
ec o
m Pr s om
volume in the country grew from 1.2 billion parcels in 2007 to 31.3 El ust oc to a
C es ms te
billion in 20166. The industry has also benefited from supportive si d
ng
policies issued by both the central and some local governments.
Some of the largest players in the local market include SF Express
(S.F Holding), STO Express, YTO Express Group, Yunda Express Custom
(Yunda Holding Co), ZTO Express. Asia-pacific is a key region Capabilities
for global express trade with China and India being the largest
markets, both of which are expected to show strong growth going
ng
forward as well with consumption levels picking up.
O Ins rki
pe p o
ra ect W
to io ed rs
Regulatory environment t ou
rF n ap H
In most countries, express delivery is a part of the logistics ac at Ad
ili
industry which is characterized by a number of government ty
and industry standards, regulations and protocols like Postal
Regulatory Commission (PRC) and United States Postal Service
(USPS). The regulations cover a broad range of protocols that
vendors must adhere to, including standard procedures for
screening of packages and trade laws between countries.
Going forward, the liberalization trend is expected to result in
innovations in the industry, especially for autonomous vehicles.
The regulatory environment for the express industry varies by
Recognizing the trend, in 2014, an expert committee of the
geography. Most countries have their own rules and regulations
United Nations added a new rule to the Vienna Convention
in place. The regulatory environments can range from highly
of Road Traffic, which is ratified by over 70 countries as the
restricted to fully liberalized. For example:
foundation for international road traffic regulation that allows
•• Countries like France and Australia reserve certain product for more road testing. It represented a significant step forward
categories for delivery by the government postal service but in the development of automated driving. National governments
allow express players to delivery these at price multiples are also reviewing regulations to allow self-driving vehicles in
specific circumstances where automated technology is proved
•• In countries like the U.K and Germany, the environment is fully
to be sufficiently mature and safe. Early adopters are expected
liberalized
to be developed countries like USA, UK and New Zealand. Similar
is the case for unmanned aerial vehicles (UAVs). Currently, the
The global trend has been moving towards liberalization.
testing is still quite limited in scope and mostly done in rural areas
Governments have been realizing the benefits of competition
but as clarity on regulations, especially in markets like the US
in the express industry such as improved efficiency and service
increase, adoption rate for these technologies is also expected to
levels. Customs capabilities for example have improved over the
accelerate.
years.
6
BusinessWire news article | China Express Delivery Industry Research Report 2017-2021- Research and Markets
12Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Key growth drivers Future of the express Industry
Global express delivery market is expected to continue showing As per global reports, express market is expected to grow at 7%
steady growth. Growth is primarily expected to be driven from CAGR and reach USD 257 bn by 2020. To differentiate themselves
high growth markets in Asia Pacific like India, China and Japan from competition, companies are likely to innovate, both in terms
which will continue to benefit from the surge in e-commerce of business models and technologies implemented.
demand. A summary of the key growth drivers for the industry
are outlined below:
Global express market forecast (USD bn)
Overall economic growth
Forecast
Revival of the manufacturing sector and overall economic growth +7%
has given a boost to the express industry. Increased business
activity, particularly growth in automobile production, electronic
product shipments, and food & beverage industry will lead to an
increase in demand for express delivery services. As consumption
expenditure, particularly in Asia pacific continues to show strong 257
growth, express delivery services industry is expected to benefit 198
from the same.
Growth in e-commerce
Urbanization and increased disposable income have led to 2016 2020
rapid growth in the e-commerce industry. The total B2C retail
Source: Technavio Global Courier Express and Parcel Market 2016-2020
ecommerce sales reached USD 1.9 trillion in 2016 with sales in
Asia pacific alone crossing the USD 1 trillion mark. This trend is
expected to continue with the industry growing to over USD 4 Business models
trillion by 2020.7 The increase in trade on online portals has driven The global express industry has been witnessing significant
the growth of the global express industry. changes. The industry is moving forward from integrators and
postal companies competing for market share to increasing
However, this growth is also expected to put pricing pressure experimentation and innovation as well as increased investment
on logistics players as e-retailers continue to search for ways in last-mile delivery start-ups all around the world. The
to reduce their logistics expenses as volumes pickup, thereby rise of e-commerce is a major contributor to this evolution
increasing focus on leveraging the benefits on economies of scale. as increasing smartphone and internet penetration have
necessitated enhancement of last-mile delivery services. The
Increasing value-added services situation is further fed by the changing retail models. There is an
Express delivery players have evolved their business models with increased focus on speed and reach which resulted in players
deeper engagement to provide a varied range of value-added like Amazon to increasingly invest in fulfilment centres. Even
services to customers and consumers. These include assortment traditional retailers like Macy’s have invested in improving speed
and grading of products, order processing through storage, of service by partnering with delivery partners to provide fast
picking, packaging, management information systems (MIS) and and reliable deliveries from their stores. As a result of this fast-
analytics services in the logistics supply chain, mobile tracking changing landscape, the express industry has seen a number
applications, online tracking of parcels, SMS and e-mail alerts, of different strategies being adopted and new players entering
hub-to-spoke collection centres, etc. the market.
Changing consumer behaviour driven by technology Diversification and Expansion of the Logistics Business by big
innovations Industry Players
The advent of social media, ecommerce, smartphone and Companies have been pursuing automation opportunities and
affordable data has provided consumers with greater buying use analytics to identify inefficiencies in order to reduce costs
choices, eliminated information asymmetries and has also in the mail segments. As the mail volumes decline globally, with
reduced switching costs. This has increased their bargaining increased utilization of digital communication, companies are
power, and led to a demand for greater convenience, more emphasizing on efficiency and increased profitability in the mail
transparency and higher service levels. To meet customer business.
expectations and to increase visibility over their supply chain,
businesses are increasingly adopting express services and
innovative solutions.
7
Emarketeer news article | Worldwide Retail Ecommerce Sales Will Reach $1.915 Trillion This Year, 2016
13Indian Express Industry – 2018| A multi-modal play in building the ecosystem
A Chinese delivery services company, which is the second
largest courier in China after China Post. Provides domestic
and international express services to a wide range of
customers
In 2015, FedEx announced its acquisition of Genco
Distribution System Inc., one of the largest third-
party logistics providers in North America
•• Through the acquisition, FedEx offers a more
The company has Invested in adding
comprehensive portfolio of logistics services,
been expanding from services such as cold-
complementing its transportation services
express delivery to chain logistics, supply
•• Helps FedEx expand its e-commerce business and the other parts of the chain finance and cross-
related reverse logistics processes supply chain border e-commerce
Source: FedEx Newsroom Article | FedEx Completes GENCO Acquisition, January 30, 2015
Logistics Management Article |FedEx acquisition of GENCO is a done deal, February 2, 2015
South China Morning Post Article | SF Express aims to increase cargo aircraft fleet to 100 by 2018, November 18, 2014
Partnerships with Retailers and other modes to Increase Access Points
Large express players like FedEx and UPS have been partnering with retailers in the US to make store locations as pick-up and drop-off
points for their packages. This helps improve efficiency in the value chain for these players reducing the last-mile delivery load.
In 2017, FedEx signed a multi-year agreement with retailer In 2014, UPS launched its ‘Access Point’ service with
Walgreen’s that will add about 8,000 store locations as neighborhood convenience and grocery stores. Those access
points of service delivery points have expanded to 8,000 locations across the U.S
Source: FedEx Newsroom Article | Walgreens and FedEx Team Up to Offer FedEx Dropoff and Pickup at Thousands of Walgreens Locations Nationwide,
January 11, 2017
Fortune Article | You'll Soon Be Able to Pick Up FedEx Packages From Walgreens, January 11, 2017
14Indian Express Industry – 2018| A multi-modal play in building the ecosystem
New Delivery Models Tapping into the ‘Sharing Economy’
Companies are tapping into the ‘sharing economy’ by matching available capacity with delivery needs. This has led to entry of players
from other spectrums of the ‘sharing economy’ into the logistics segments as well as entry of a number of start-ups.
A number of entrants seen in the ‘crowd-sourced’ delivery space
Launched UberCARGO in Hong Kong Chicago-based startup helps Norwegian startup matches
allowing consumers to load and customers in intra-city transportation commuters and travelers with
deliver larger items, especially used of items by matching them with consumers looking to ship items,
for business consumers registered drivers within a city and nationwide
Launched UberRUSH offering
express delivery services targeting
online retailers
Source: Techcrunch Article | Uber’s Latest Experiment Is Uber Cargo, A Logistics Service In Hong Kong, January 8, 2015
Business Insider Article | UberRUSH opens API to online merchants, June 14, 2016
Seattletimes Article | Dolly raises $8 million to be ‘the friend who has a pickup truck’, October 1, 2015
The Guardian Article | The innovators: Nimber delivers latest development in the sharing economy, July 12, 2015
Aol Article | Could the 'sharing economy' make parcel delivery cheaper?, May 22, 2015
Technology Innovation
Technology is playing a key role in the industry as traditional players adopt their strategies to meet the increasing demands of
consumers as well as find ways to improve operational efficiency in this intense competitive environment. Investments into innovations,
especially into digital solutions and new technologies are seen amongst industry players as critical to adapting to the digitally enabled
consumers’ needs.
Increased Investment Into Technology And Automation Adoption In Mail Segment By Large Postal Companies
Snapshot of technology trends in the express industry
Technology
Trend
Internet Evolving IT Data Cloud Blockchain Robotics Autonomous Drones
and IoT Standards Analytics and Vehicles
Automation
Improved Facilitating Enhancing Enabling Upgrading Reducing Increasing Achieving
Impact
supply chain collab- customer new plat- supply the reliance efficiencies cost effi-
transparency, oration, experiences, form based chain on a human in the deliv- ciencies
safety and increasing improve- business technology, workforce ery process with ref-
efficiency efficiency ments in models and reduction resulting in erence to
and trans- operational aiding new in paper increased inventory
parency efficiency technolo- based efficiencies manage-
gies such as documen- and lower ment,
tracking and tation costs in the surveil-
E-signatures long term lance and
for delivery delivery
verification
Source: Deloitte Analysis
15Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Companies have been pursuing automation opportunities and use analytics to identify inefficiencies in order to reduce costs in the
mail segments. As the mail volumes decline globally, with increased utilization of digital communication, companies are emphasizing on
efficiency and increased profitability in the mail business.
bPost is the leading postal operator in Belgium and one of Government-owned corporation that provides postal
the largest civilian employers in the country offering a wide services both locally and internationally in Australia, with
range of postal and financial products and services annual revenues of c. AUD 7 billion
In 2013, deployed a Guide customers more Launched MyPost, a Provides customers with
new IVR (Interactive efficiently through inbound platform and mobile an electronic version of
Voice Response) contact-center calls by routing app that creates a their mail and manage
solution at it HQ in them to best suit individual digital mailbox and delivery preferences
Brussles needs manage deliveries helping improve the
service quality for the
Enables bPost to meet customer and improving
customer demand of better operational efficiency for
and easier service for both the company in managing
corporate and personal users their last-mile deliveries
Source: Realwire Article | ‘Perfect Partnership’ Delivers IVR with Intelligent, Personalised Call Steering and Self-Service to Belgium’s bpost, April 29, 2013
Accenture Report | Achieving High Performance in the Post and Parcel Industry, 2015
Autonomous logistics – Both on the ground and in the air
Autonomous logistics have seen rapid advancements in recent years. Both self-driving vehicles for ground logistics as well as unmanned
aerial vehicles (UAVs) are beginning to be introduced into the global logistics value chain. Self-driving cars are at an advanced stage of
maturity. Major providers like FedEx and DHL have also begun investing into projects for furthering these technologies, following the
lead of players like Amazon and Google, who have already reached more advanced stages of these programs.
In 2017, FedEx entered into a partnership with U.S based DHL parcel successfully concluded a three-month of its third
startup Peloton Technology to test self-driving tractor-trailer Parcelcopter generation. This is part of larger research and
platoons. Peloton’s platoons follow a lead vehicle that uses innovation project.
vehicle-to-vehicle communication technology to control the
drive systems of the trucks in its caravan. This helps reduce Marked the first time a worldwide parcel service provider
wind resistance and therefore fuel costs. integrated a parcelcopter logistically into its delivery chain.
Source: Technologyreview Article | FedEx Bets on Automation as It Prepares to Fend Off Uber and Amazon, February 3, 2017
DHL Press Release Article | Successful Trial Integration of DHL Parcelcopter into Logistics Chain, September 5, 2016
16Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Autonomous vehicles and the future of last-mile logistics been around in the industry for a few years. As noted earlier,
Growth in B2C e-commerce has led to increased focus on players have also been entering into partnerships with retail
last-mile logistics with increasing investments being made into outlets for drop-off and pick-up locations which is an adapted
this arena. Autonomous vehicles have already started being version of this delivery model. However, as the consumers
introduced by the major players. Two major delivery models in continue to insist on greater convenience, Autonomous
this area are expected to play a significant role in the last mile in Ground Vehicles (AGVs) with parcel lockers will provide a
the future including: cost-effective solution to last-mile logistics in the future. Some
studies suggest that this method could provide a cost benefit
•• Drones/ UAVs: As the internet penetration increases in rural
of as much as 40% over traditional last-mile delivery methods.
areas, demand for express services from such regions is also
expected to increase. Providing services to these regions is
Machines joining the logistics workforce
seen to be very costly for companies with any kind of driving
Significant strides are also being made in the area of human-
vehicle. As a result, companies are expected to begin extensive
machine interaction and collaboration in logistics. Robotics and
use of drones to deliver parcels, especially in rural areas where
automation are helping providers introduce efficiencies in their
infrastructure limitations make time-bound ground delivery
value chains. Collaborative robots are being slowly deployed by
challenging
companies like FedEx and DHL which help reduce time and effort
•• AGVs with parcel lockers: The concept of parcel lockers has wastage in operations.
FedEx has been working with Savioke, a silicon valley based DHL has conducted successful tests in using collaborative
company that makes automated indoor delivery robots, robots working side-by-side with the employees.
to develop a robot delivery system for its repair facility
Tennessee. These next-generation robots are supporting repetitive and
physically demanding tasks in logistics operations.
Bots are used by workers to cut down on wasted time and
storage space
Source: Quartz Article | Fedex is using autonomous robots to essentially replace the mailroom clerk, April 13, 2017
Supply Chain Digital | Automation and robotics: The supply chain of the future, May 3, 2017
Advanced cold-chain packaging innovation
Innovations are also being seen in the cold-chain logistics space. Packaging innovation allows good such as frozen foods,
pharmaceuticals and sensitive high-tech products via standard parcel networks and last-mile delivery services, reducing the need for
climate-controlled trucks and containers. New concepts include reusable thermos boxes and smart packages that can report and
control oxygen, humidity and/ or pressure.
German company Die Bauerntute connects farmers with customers creating a new distribution channel for farmers
Uses DHL’s network to deliver fresh food within one day in temperature-controlled reusable boxes, which helps meet the growing
demand for fresh and organic foods and ingredients
Source: DHL Report 2016 | Logistics Trend Radar: Delivering Insight today. Creating Value Tomorrow!
17Indian Express Industry – 2018| A multi-modal play in building the ecosystem
India’s position in the global express market
While still a very small market globally, with less than 2% of the
global market size, India has one of the fastest growing express
industry. Between 2012 and 2017, the industry showed significant
growth of close to 15% CAGR to reach USD 3.4 bn (INR 22,000 cr).
The Indian express industry is currently fragmented with more
than 1,000 active players. The key players include - the large scale
domestic players, Indian entities of the leading global players as
well as the express arm of the government postal service, express
arms of e-retailing companies and recently emerging start-ups
specializing in e-commerce deliveries.
Indian express industry (USD bn)
3.4
1.7
FY12 FY17
(estimated)
Source: Deloitte Analysis, Express Industry in India FY12 by Crisil Research
The Indian express industry is transforming rapidly with the rise
of e-commerce, the government’s focus on the manufacturing
sector, demand from MSMEs, regulatory reforms such as the
GST and the increasingly strategic significance of logistics for the
industry. The development of enablers such as the road and air
infrastructure and technology is assisting the players to cater to
the growing demand. Improving tax policy and infrastructure
development has also led to a strong bullish sentiment for
investment amongst both domestic and international players.
Owing to these factors, the industry is expected to grow at a CAGR
of 17% for the next five years, increasing its contribution to the
international express industry to more than 2.5% by 2022.
18Indian Express Industry – 2018| A multi-modal play in building the ecosystem
19Indian Express Industry – 2018| A multi-modal play in building the ecosystem Indian express industry – An overview 20
Indian Express Industry – 2018| A multi-modal play in building the ecosystem
The Indian express industry is one of the fastest growing express penetration and mobile phone penetration have significantly
industries globally. It has grown at ~15% CAGR over the past five changed the way communication and business transactions are
years and is estimated to be worth INR 22,000 cr in FY17. conducted. Shipment of documents has shrunk considerably due
to adoption of the more convenient and cost effective electronic
The industry which includes both domestic and international communication channels.
(cross-border) shipping, originated in the 1980s in its formal
organized form and has seen many shifts since its inception. The number of internet users in India have grown at 27% CAGR
over the last five years.8 The internet penetration has improved
Evolution of the express industry in India from 11% in FY12 to more than 30% in FY17.9 Customers
Inception of the express industry shopping habits have witnessed a remarkable change with the
One of the earliest precursors of the express industry improved accessibility of internet. This is reflected in the growth
in India were the angadias (meaning people who carry of the e-retail industry in India from less than USD 2 bn in FY12 to
goods along with them, in person). The angadias were USD 10-12 bn in FY17.10 E-retailing led to a surge in the demand
engaged by traders in Mumbai and Gujarat to deliver gold, cash for well-functioning express delivery services.
and precious gems in an expedited mode.
The traditional express players started developing customized
The origin of the organized express industry in India in its modern solutions and services for this new market in the mid-2000s.
form can be traced back to 1980s with the launch of Speed Post Addressing the demand of express delivery from e-retail, needed
services by India Post as well as rise of home grown companies a shift in the traditional delivery networks – while the traditional
providing express delivery services. The early 1990s saw the B2B players were not equipped for the last mile delivery
leading global players extend their operations to India, opening challenges, the traditional B2C players who were mostly handling
the gateway to international express. The focus initially was home shipments of documents weighing on an average less
on the delivery of documents, the customers being banks and than 500 grams were not equipped to handle the e-commerce
financial institutions and business houses. volumes. E-commerce not only added a huge volume of
shipments but also led to newer challenges in terms of return
Growth driven by technology adoption, B2B shipments, cash on delivery, delivery in remote locations, non-
demand homogeneity of parcels, reverse logistics, etc.
As the scale of operations and expertise grew, the
industry widened its coverage to non-document Additionally, the demand centers which were previously confined
shipments. Shortening of product lifecycles, evolving business to select commercial centers and industrial geographies now
models such as just-in-time manufacturing, global outsourcing, extended to entire middle class population of the country –
and increasing demand for expedited delivery created newer metros, tier 1, tier 2 cities and slowly extending to tier 3, tier 4
demand segments for the express industry. Advancement of towns. Hence, newer players stepped in to cater to the demand
technology led to automation of critical functions such as tracking, of volumes by bringing solutions around reach, speed, reliability,
scheduling, handling consumer conversations, etc. This enabled agility and customer satisfaction. The traditional players also
the companies to scale up to cater to the growing demand. This started setting up separate units to cater to this segment. Having
was also supported by the development of the aviation sector and established themselves in the e-commerce express delivery
liberalization policies. space, some of these are also making their foray in B2B delivery.
The express industry continues to witness newer business models
Impact of internet penetration and e-commerce based on outsourcing certain parts of value chain to adapt to the
By FY12, express delivery services were widely used in evolving needs of the Indian e-retail industry.
India for different types of shipments like commercial
documents, samples, material parts, spare parts Value chain of the Indian express industry
and other goods. The most popular shipments were - time One of the key characteristics of the express delivery service
sensitive documents and non-documents such as high value low is the integrated nature of the service where the company
weight products, perishable products and products with short maintains control over all the aspects of the end to end
commercial life cycle. Documents constituted a significant share transportation process. Even though the shipment transport may
of the deliveries – 36 per cent by value and 69 per cent by volume. involve multiple modes of transport and different regulatory or
operational procedures, the customer has to deal with only one
However, the demand landscape has witnessed a significant touchpoint for the complete delivery life cycle of the shipment.
shift since then due to the increasing penetration of internet and The value chain for the flow of shipment in the express industry is
rise of e-commerce. Over the last five years, increasing internet depicted below.
8
Deloitte analysis
9
IAMAI-IMRB I-cube estimates, Deloitte analysis
10
Deloitte analysis
21Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Flow of shipments in the express industry
Collection Transportation Distribution
Shipper Pick-up Local Office Collection Distribution Local Office Delivery Consignee
Station / Center Center Station /
Warehouse Warehouse
(Origin) (Destination)
Source: Industry discussions conducted by Deloitte
Pickup/collection, sector-wise sortation, transportation, and Contribution to the economy
delivery/distribution are the main activities in the value chain Express operators provide fast, reliable, on demand, integrated,
for express delivery services. The express players work on a door-to-door movement of shipments across the world which
hub and spoke model, very similar to the global counterparts. are tracked and controlled throughout the journey. One of the
The collection of the shipment from the door of the shipper or most important contributions of the express industry is its impact
the consignor is generally done once a day (typically at the end on the competitiveness and growth of the other industries. It
of business hours) for the B2B shipments and intermittently at is one of the fastest growing segments of the Indian logistics
regular intervals throughout the day as per the promised service industry – the express industry had witnessed a 15% CAGR
levels for the B2C – e-commerce shipments. The shipments thus growth over the past 5 years while the logistics industry grew at
collected at the branches are transported to a processing hub ~8% CAGR. The industry contributes about 3% to the Indian total
centers where the sorting takes place. logistics industry. Express is a significant contributor to the Indian
economy by facilitating the speed of trade and commerce plus in
In case of air express, the service providers typically have their terms of employment creation and infrastructure development
hubs in or around airports, for speedy transportation. Certain and to the government in terms of the tax revenues.
larger players have their own air cargo fleets while the others rely
on the belly cargo of commercial airlines for cargo uplift.
Facilitating trade
and productivity
In case of surface express, the movement largely happens by
road and to some extent by rail. The trucks which are used on
scheduled operations model for movement are either leased or
owned by the service providers. In some of the newer business
models, the service providers also outsource this mid-mile
transportation (co-load/shared uplift) to a third party player.
Shipments are consolidated at the Hub center and may be moved
to a local distribution office or directly picked for the last mile Contribution
delivery. of express
industry to the
In addition to collection, transportation and delivery, the service economy
providers provide customs clearances for international shipments
and state border clearances for domestic shipments. They also
provide services such as special order processing by packaging,
storage, deferred delivery, reverse pick-up. All of these services Contribution to Contribution
have a vital impact on the economy. employment to exchequer
22Indian Express Industry – 2018| A multi-modal play in building the ecosystem
Facilitating productivity and trade Contribution to employment creation
By providing logistics links to the customers, the express Express service is a labor intensive industry and creates many
providers play an important role of an enabler for businesses. employment opportunities. The Indian express industry is
They help businesses reach out to their customers and partners estimated to employ around 1.6 mn people. This includes
by providing simplified and reliable shipment services. personnel across wide range of skills, including loading, sorting,
delivery, technicians, administration, sales and management.
Express delivery services are becoming increasingly important for In addition, the industry also employs services such as
the competitiveness of companies – to maximize the efficiency transportation, airport clearance services, cargo handling, leading
of their production activities, minimize their inventory costs, and to a significant indirect employment.
provide a superlative customer experience. Small, medium and
micro enterprises are the key users of express. They engage with Contribution to exchequer
express players for high quality, rapid delivery services. Express The express industry makes significant contribution to the
is also vital for companies looking to participate in cross border exchequer. The industry is expected to have contributed close
trade / markets. to INR 3,000 cr in FY17 by the way of Service Tax paid in the form
of input credit and cash.11 In addition, there is also a significant
From a domestic B2B stand point auto-components, textiles, contribution in the form of direct taxes paid by the industry, the
electronics and IT hardware, pharmaceuticals and industrial personnel employed by the express industry as well as the taxes
goods, are the key consumers of express. With increasing focus paid by other industries dependent on the express industry.
by the government on Make in India, these industries have
started posting healthy growth rates and in turn express industry Also, the international express segment contributed close to INR
is witnessing a sharp increase in demand for express services 2,000 cr in the form of Custom Duties paid for the inbound and
because of this. outbound express.12
Banking and financial services and e-retail constitute the balance As the express industry continues to grow, the economy is
market of B2C shipments. E-retail has been the major driver of expected to benefit manifolds by way of improved productivity for
the express industry in the past 5 years. This segment of the the businesses, increased employment creation and higher tax
market has also brought about an increase in the competitiveness contribution to the government.
of the industry by bringing an increased focus on expanding
reach, technology to reduce the transit time, improve agility and
end consumer satisfaction. New business models have evolved
involving outsourcing and focus on specific part of the value chain
such as first mile, long haul, and last mile.
11
Department of Revenue, GOI, Deloitte analysis
12
Central Board of Excise and Customs
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